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Summary of Indosat- IM2 case 
Background 
The relevant parties in this case are PT. Indosat, Tbk (Indosat) and PT. Indosat...
Court cases and findings 
Criminal proceedings were brought by the Public Prosecutor from the Attorney General 
Office aga...
Contradiction in outcomes 
The main allegations and the substance of the cases in the Administrative Court and 
Corruption...
 The Agreement between Indosat and IM2 only regulates collaboration for the 
utilization of Indosat’s telecommunications ...
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Legal summary of im2

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Legal summary of im2

  1. 1. Summary of Indosat- IM2 case Background The relevant parties in this case are PT. Indosat, Tbk (Indosat) and PT. Indosat Mega Media (IM2). Indosat is a licenced Mobile Network Operator in Indonesia. It was awarded spectrum in the 2.1 GHz-band following a tender. Furthermore, Indosat also has a licence as an ISP. IM2 has a licence as an ISP to provide multimedia services. In February 2006, Indosat and IM2 entered into a cooperation agreement regarding internet service access through the 3G/HSDPA network of Indosat, as amended several times. In accordance with the agreement, IM2 would sell internet service access under the brand name of IndosatM2 to IM2 customers using the 3G/HSDPA network of Indosat. The parties agreed on a revenue sharing scheme where Indosat would receive 66% and IM2 would receive 34% of the revenues. Indosat was obliged to provide network connectivity and was also responsible for providing, operating and maintaining the 3G/HSDPA network. In October 2011, an NGO filed a report with the High Prosecutor Office in West Java stating that it suspected that IM2 had illegally used frequencies, allocated to Indosat, in the 2.1 GHz-band for 3G services and that this had caused a revenue loss to the State in the amount of IDR 3.8 Trillion. Following this report, the High Prosecutor Office initiated an investigation. In January 2012, the authority for the investigation was taken over by the District Attorney. During the investigation, the Finance and Development Supervisor Board (BPKP - State Audit Investigation Agency) was asked to calculate the State’s revenue loss. According to the BPKP, the state’s loss amounted to approximately IDR 1.3 Trillion, consisting of non-payment of an Up Front Fee and Frequency BHP. (The loss was calculated using the Up Front Fee and Frequency BHP paid by Indosat following the tender). In a press release in January 2012, the Department of Communications and Informatics - Kementrian Kominfo (the regulator for telecommunication sector which includes radio spectrum) announced that the cooperation between Indosat and IM2 had been made in accordance with the prevailing laws and regulations and that no obligation could be imposed by the state on IM2. This was followed by a letter by the Minister of Communications and Informatics in February 2012 to the Board of Directors of Indosat with a similar message. In November 2012, the Minister also sent a letter to the Attorney General, confirming that there was no violation in the Indosat-IM2 cooperation. It was moreover pointed out that hundreds of similar cooperation agreements have been entered into by telecommunications operators and ISPs.
  2. 2. Court cases and findings Criminal proceedings were brought by the Public Prosecutor from the Attorney General Office against the former President Director of IM2, Indar Atmanto. These proceedings were examined by Corruption Court of Central Jakarta District Court and subsequently appealed to the DKI Jakarta High Court as the Appeal Court of the Corruption Court. In the view of the Public Prosecutor, Indar Atmanto as the President Director of IM2, between 24 November 2006 and up to 15 January 2012, had conducted an unlawful act by enriching himself or others or a corporation that may harm the State’s financial or economic conditions. The Public Prosecutor Indictment states that unlawful act by Indar Atmanto was conducted by signing “cooperation agreement regarding internet service access through the 3G/HSDPA network of Indosat” which cause frequency sharing and/or illegal use of 2,1 Ghz frequency by IM2 in which the frequency was allocated to Indosat. The Corruption Court accepts entirely the indictment from the Public Prosecutor and rejects all defence statement from Indar Atmantothe corruption court also accept Public Prosecutor argument stating that Indosat and IM2 would have to pay compensation in the amount of approximately IDR 1.3 Trillion. These demands presumably will be put forward in separate proceedings, as the case is being investigated by the Attorney General Office.. In July 2013, the Appeal Court upheld the decision by the District Court, finding that Indar Atmanto, was guilty of conducting a corruption and sentenced him to eight years imprisonment. The decision has been appealed to the Supreme Court and has been through the Supreme Court procedure (cassation). It is now seemed like the Supreme Court has rendered its judgment which is not in favour of Indar Atmanto but there has not been any formal notification of the decision. A Judicial Review attempt will be available to Indar Atmanto upon receipt of the Supreme Court (cassation) decision. For this review to take place, new evidence must be submitted to the court. Indosat has collected new evidences from five cities that there was no spectrum sharing as part of the cooperation agreement. In showing that similar cooperation agreements among MNO and ISP, essentially resale agreements, are common throughout the World, an expert opinion, from the ITU would be instrumental. The new evidence will be reviewed by the lower courts and minutes of this will be sent to the Supreme Court which may then decide to change its decision. Note that panel of judges to try the Judicial Review will be different than that who ruled the cassation case. In addition to the criminal case against Indar Atmanto, Indosat, IM2 and Indar Atmanto filed a lawsuit in the Administrative Court (PTUN), challenging the State loss calculation from BPKP. The Administrative Court ruled in favour of Indosat, IM2 and Indar Atmanto and found that there was no State loss, since there had been no frequency sharing between Indosat and IM2. This decision has subsequently been upheld by the High Court and Supreme Court (cassation) and is now deemed to be a final and binding decision. Be that as it may, a Judicial Review attempt is available, if BKPP decides to defend their calculation although basis for submitting a Judicial Review remains to be seen.
  3. 3. Contradiction in outcomes The main allegations and the substance of the cases in the Administrative Court and Corruption Court are similar: a) Due to a cooperation agreement between Indosat and IM2 signed by Indar Atmanto on behalf of IM2, IM2 has illegally used spectrum in the 2.1 GHz-band, allocated to Indosat. b) Due to the cooperation agreement and the illegal usage of spectrum, IM2 has caused the State a loss of approximately 1.3 Trillion IDR. Although the substance and merit in the different cases in the Appeal Court and in the Administrative Court are the same, the respective decisions contradict one another. The Corruption Court decided that there is a State loss due to frequency sharing between Indosat and IM2, while the Administrative Court decided that there is no State loss since there has not been any frequency sharing. Relevant Law Law no. 36 of 1999 Article 9 paragraph 1; Telecommunication network operator as referred in Article 8 paragraph 1 can provide telecommunication service. Article 9 paragraph 2: Telecommunication service as referred in Article 8 paragraph 1 in providing telecommunication service, uses and/or rent telecommunication network owns by telecommunication network operator. Government Regulation number 52 of 2000 In providing telecommunication services as referred in article 3 letter b, telecommunication service operator may use telecommunication network owned by a telecommunication network operator. Relevant facts and information: a) During the court hearing in the Corruption Court, witnesses and experts from the Ministry of Information and Communication stated that :  In conducting its operations, IM2, as a telecommunications service provider, was allowed by law to use the network owned by a telecommunications network provider (Indosat) based on a collaboration agreement. This is sufficiently stipulated in Article 9(2) of Law No. 36/1999 regarding Telecommunications, and Article 13 of Government Regulation No. 52/2000 regarding Provision of Telecommunications.
  4. 4.  The Agreement between Indosat and IM2 only regulates collaboration for the utilization of Indosat’s telecommunications network. There is no provision that provides for the joint utilization of a radio frequency spectrum, contrary to what has been alleged. Cooperation scheme:

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